Barclays saw a 12% decline in profits during the first quarter, primarily due to reduced demand for mortgages and loans resulting from higher UK interest rates.
Additionally, economic uncertainty impacted the performance of its investment bank. The UK bank reported a decrease in pre-tax profits to £2.3bn for the first quarter, down from £2.6bn the previous year. This decline followed a period of robust quarterly profits in 2021, driven by multiple interest rate hikes by the Bank of England.
Despite UK interest rates reaching 5.25%, enabling banks to charge higher rates for loans and mortgages, the resulting strain on households has led to reduced borrowing appetite. Barclays noted a 1% decrease in loans and advances to customers during the quarter, primarily due to subdued demand for mortgages. Executives confirmed that the bank was increasing the proportion of high loan-to-value mortgages offered to customers, potentially aiding a recovery in its loan book.
Simultaneously, pressure has mounted on banks like Barclays to raise interest rates for savers, further compressing its income. Intense competition has exacerbated the situation, with customers opting for more lucrative options offered by competitors, resulting in a 2% decline in deposits at Barclays.
In total, Barclays reported a 4% decrease in net interest income, which represents the disparity between earnings from loans and expenses for savings, at its UK bank, amounting to £1.5bn.
